PRICE ELASTICITY OF SUPPLY - 2.3

])
( § ( measure


of the QD
of
of
the

a
responsiveness

good supplied
y
to
changes in its
price
) )
§U y relatively large responsiveness
-


ELASTIC


relatively small responsiveness INELASTIC
-




→
PES =

percentage change in Qty Supplied = % DQS DQS Q final Q initial
PES →
.



= -




-




% DP
percentage change in
price of good QS → Q initial

* PES is always tve be relationship b/w price and Qty supplied DP
-
→ Pfmal -



Pin , Hal
is positive P → Pm , Hal



RANGE OF VALUES
↳ of intersecting elastic it
in the ease curves , flatter the
supply curve the more is at
any given price



PES L I [ supply INELASTIC] PES > I
[ Supply PRICE ELASTIC ]
°
°
is PRICE is



: Yo DQSL % DP ;
quantity supplied is : % DQS > % DP
; quantity supplied is


UNRESPONSIVE to changes in
price RESPONSIVE to
change in
price

Price inelastic supply : PES b Price elastic
a < I supply : PES > I


B when supply curve 's
p
p
s B when supply curve 's end point -
cuts the


end point cuts the n Pz VERTICAL AXIS


/
-




i
- - - - - - - - - - - - - - - - - -




A
Pz

)
- - - - -
- - - - - - - -
.




10% ! HORIZONTAL AXIS 10% p, - - -
- - - - - - - -
• I
l
,

Py - - - - - - - - -



y
. l l


i i : :
l
l l l

l l
l l

l l l l
! I l l
O O
Q1 Q2 Q Q1 Q2 Q
FF
-

15%
P s


PES =L [ Supply ]
°
is UNIT ELASTIC


Yo ( unitary PES) PES O [ Supply INELASTIC ]
°

% DO,
°

DP PERFECTLY
-


=
is
-


.




c Unit elastic supply : PES = 1
:
Yo DQS=0 ( no change in QS no matter DP )
O
QI Q
P s,
P

s
,
* any supply curve
passing
°
PES = A
[ supply PERFECTLY ELASTIC ]
through ORIGIN has PES IS
s
p,
§
equal to
unity
:
any change in
price
=
Infinitely large
O Q

°
change in
quantity supplied
Q